Corning stock drops after soft earnings guidance: buy the dip?

Corning stock plunged by over 12% in the premarket session after the company published the latest earnings report. GLW dropped by 12% to $122.92, its lowest level since March 9 this year. It has plunged by 54% from the year-to-date high of $271, with its valuation falling from $219 billion to $123 billion. 

Corning stock drops after its earnings report

Corning, a top company that manufactures the popular Gorilla Glass, display glass, and advanced optics solutions, has been in a strong bull run this year, helped by its partnerships with companies like Nvidia, Meta Platforms, and Amazon. 

These deals will see the company boost its optical connectivity manufacturing capacity by about 10%. It will also expand its fiber capacity by over 50%, including three manufacturing plants in the country. 

As a result, it aims that these deals will help it meet its Springboard Plan, which aims to grow its annualized run rate of $20 billion by the end of this year to $30 billion by the end of 2028. It aims to grow this figure to $40 billion by 2030.

Still, despite these metrics, the stock has dropped sharply after releasing its results. Its results showed that its core sales jumped by 17% in the second quarter to $4.74 billion, with its core EPS rising by 30% to 78 cents. Its optical communications sales jumped by 32% to $2.07 billion. 

By segment, its optical communications revenue jumped by 32% to $2.07 billion, while the glass innovations segment rose by just 1%. The automotive segment rose by just 2%, while its solar business soared by 90% to $438 million after completing a prolonged maintenance shutdown. In a statement, Wendell Weeks, the CEO, said:

“We continue to deepen our long-term customer partnerships with industry leaders, most recently with Amazon and NVIDIA. These partnerships provide strong proof points supporting our exciting Springboard Plan.”

Softer guidance and valuation concerns

A key concern among investors is that its guidance was relatively softer than expected. It now expects that its third-quarter sales will rise by 16% to between $4.9 billion and $5 billion.

At the same time, there are concerns that the company’s business has become highly overvalued. The company has a forward price-to-earnings ratio of 45, higher than the sector median of 24. 

Despite this, analysts believe that Corning has more upside to go. Citigroup’s Asiya Merchant boosted his target from $225 to $240, while Oppenheimer boosted from $210 to $230. Bank of America’s Wamsi Mohan sees the stock soaring from $223 to $243.

GLW stock technical analysis

Corning stock chart | Source: TradingView

The daily chart shows that the Corning share price has crashed in the past few months. It fell from a high of $271 on June 30 to a low of $122.9 today. 

It has dropped below the lower side of the ascending channel pattern. Most notably, the stock has dropped below the 200-day moving average and the Ultimate Support of the Murrey Math Lines.

Therefore, the stock will likely continue falling with the next target being the extreme oversold level of $100.